The Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, has said that the Bank’s decision to implement the Electronic Foreign Exchange Matching System (EFEMS) is rooted in the understanding that trust is essential to central banking.
Addressing members of the Harvard Club of Nigeria in Lagos at the weekend on the topic:
“Leadership in Challenging Times: Restoring Credibility, Building Trust ,and Containing
Inflation,”
Mr. Cardoso reiterated that the CBN’s move was to enhance transparency and
provide more accurate oversight of foreign exchange transactions.
According to him, “Trust is the currency of central banking. If the public loses trust in the
institution, the efficacy of its policies diminishes.Our decision to implement the Electronic Foreign Exchange Matching System (EFEMS) is rooted in this understanding.
“Byenhancingtransparencyandprovidingmoreaccurateoversightofforextransactions,
wesendastrongsignalthattheCBNisseriousaboutfairandefficientmarkets,”he
added.
Mr. Cardoso, who marks one year inoffice as CBN Governor, this week, toldhis audience
that leadership, especially as the head of a central bank, often requires making difficult
and sometimes unpopular decisions.
He emphasised that the Bank is a listening
institution, unafraid to reconsider decisions if they fail to meet its original objectives.
“In theface of economic challenges,it isimperative tofocus oncore objectives restoring the credibility of the institution, building trust in the financial system, and, most critically, containing inflation. These are not just strategic goals; they are foundational to any meaningful recovery,” he said.
Speaking on his journey on the saddle, Mr. Cardoso recalled that upon assumption of
duty, he understood that the credibility of the Central Bank of Nigeria (CBN) had to be the
bedrock of the actions he and his team took.
He said, “Without credibility, no policy, however well-intentioned, can succeed. Floating the
naira, a decision met with considerable public criticism, was necessary to bring the official
exchange rate closer to market reality.
The disparity between the official andparallel rates had encouraged arbitrage and speculation, eroding trust in the market.
“Credibility is earned by consistency. The decision to close this gap,while painful in the
short term, sent a message to market participants that the CBN was committed to
transparency and sound monetary policy,”
Noting that speculative trading had
been reduced, and stability was gradually returning to the currency markets.
While noting that containing inflation remained the Bank’s core mission, he acknowledged
that the CBN was yet to meet its target.
However,hestressedthatrecentdeclines
reportedby the National Bureau of Statistics (NBS) in July and August 2024 showed that
the CBN was moving in the right direction.
He explained: “Our decision to raise the Monetary Policy Rate (MPR) to 27.25% was a
bold move. Higher interest rates, while painful for borrowers, are necessary to curb excess
money in circulation and control inflation.
Leadership is about making hard choices to
secure long-term stability over short-term comfort in moments like these. Highlighting key leadership lessons, Cardoso said: “Leading through challenging times means avoiding the temptation to take on too many initiatives. The Central Bank must focus on its core mandate price stability. It is easy to become distracted by various political and economic pressures, but as a leader, one must prioritise.
“Effective communication is as important as the right policy. Clear and open communication fosters trust. From publishing the results of the Dutch Auction to ensuring regular updates on economic data, transparency has been our guiding principle. Trust is built on the belief that a central bank will take the necessary steps to ensure economic stability, even when those steps are uncomfortable or politically contentious,” he declared.
